In Case You Missed It: The Topsy-Turvy View of Poverty

In this issue, debate on views of the poor and the policy challenge, how to think about and use financial capital to improve society, and our greatest hits.

Must Reads: The Atlantic's Olga Khazan reports on some innovative health initiatives to combat health problems such as stress and weight issues by people making the connection between poverty and poor health. Heron's Buzz Schmidt is back this week arguing that Stanford's divestment from fossil fuels offers lessons for reevaluating all investments for social impact. The Council on Foreign Relation's Michael Spence over at the Renewing America blog looks at what 3D printers hold for the already troublesome trends in global supply chains and labor displacement. Lastly, the Center for American Progress has this report on the Promise Zones Initiative and whether they can revitalize high poverty areas. [**Editor's note: Thanks to all of you who have taken our survey. There's still time to weigh in and let us know your thoughts about our posts. Just click here. ]

The bigger issue here is the constant juxtaposition of traditional values with social safety nets, as if they were mutually exclusive or, worse, had a zero-sum relationship. The logic is that people rely on public benefits because they have turned their backs on traditional values.

This is part and parcel of conservative thinking about the rich and poor in this country: that the poor are so because they lack some basic value — ambition, for example — and the rich are so because they have an abundance of it.

The distinction is an old one (here's a particularly precious, old-fashioned definition of the "deserving poor" from what sounds like Charles Dickens' time). But exactly who we're talking about as deserving of help in America has changed with time. And, as a result, our welfare system now no longer primarily serves the poor who are most in need of aid, research suggests... As federal support for AFDC [assistance for families with dependent children] plummeted, funding for programs like the EITC [earned income tax credit], the Child Tax Credit and Supplemental Security Income rose (Moffitt is showing relative trends here in a power-point presentation without a labeled y-axis):

The result? The distinction between who we're effectively helping and who we're not has grown sharper since the 1980s, Moffitt argues. Today, the "deserving" are working, married and have children. The undeserving are single parents, childless adults and anyone who's out of work and so doesn't qualify for tax breaks.

The Huffington Post features an episode of Oprah's Where Are They Now looking a woman interviewed originally in 1987 who was able to get off of welfare. In Washington Post, Harold Meyerson offers up some contrary news about high minimum wages and job growth:

In April, the Paychex/IHS survey, which looks at employment in small businesses, found that the state with the highest percentage of annual job growth was Washington — the state with the highest minimum wage in the nation, $9.32 an hour. The metropolitan area with the highest percentage of annual job growth was San Francisco — the city with the highest minimum wage in the nation, at $10.74. This suggests that the relationship between a high minimum wage and job creation needn’t be inverse. If anything, it suggests that relationship is direct... What critics of a higher minimum wage ignore is that, by putting more money into the pockets of the working poor — a group that necessarily spends nearly all its income on such locally provided basics as rent, food, transport and child care — an adequate minimum wage increases a community’s level of sales and thereby creates more jobs.

All the Hullabaloo About Capital

Let's start with a bit of this hilarious cartoon from the Guardian's First Dog on the Moon--you'll need to click the link to read the entire strip, which sadly uses language your editor will not reprint:

The New York Times' David Leonhardt discusses the findings of Thomas Piketty's book on capital and argues that while "rising inequality is a trend, [it] is one we have helped create and one we can still change." If you haven't gotten enough of all the Piketty debate, you might want to catch discussion by the Financial Times' Chris Giles and the Upshot's Neil Irwin on whether his numbers are wrong. Your editor is interested in other ideas beyond the Piketty debate on how to address capital in the 21st century and how it might be used to decrease poverty. So here are a few. Unilever's Paul Polman had this is to say over at McKinsey:

Any system that prevents large numbers of people from fully participating or excludes them altogether will ultimately be rejected. And that’s what you see happening. People are asking, “What are we doing here? The amount of resources we currently use is 1.5 times the world’s resource capacity. Is that sustainable? A billion people still go to bed hungry. Is that sustainable? The richest 85 people have the same wealth as the bottom 3.5 billion. Is that sustainable?” Digitization and the Internet have given consumers enormous abilities to connect and aggregate their voices. Power is dispersed, but wealth is concentrated. Further development and population growth will put a lot more pressure on our planet. Capitalism needs to evolve, and that requires different types of leaders from what we’ve had before. Not better leaders, because every period has its own challenges, but leaders who are able to cope with today’s challenges (see sidebar, “From the archives: The social role of the world enterprise”). Most of the leadership skills we talk about—integrity, humility, intelligence, hard work—will always be there. But some skills are becoming more important, such as the ability to focus on the long term, to be purpose driven, to think systemically, and to work much more transparently and effectively in partnerships. There are enormous challenges, but business leaders thrive on them and are well placed to solve them, as they also offer enormous opportunities. I often say it’s too late to be a pessimist.

McKinsey has joined with the Canada Pension Plan Investment Board to start a new initiative focused on long-term capital. Meanwhile, a group of professors pan the "shared value initiative" in this scathing report, arguing it "may actually prove counterproductive in its goal to create a better world by reshaping capitalism." In the Harvard Business Review, Gautam Mukunda looks at the power of Wall Street and says the situation needs to be rebalanced in order to "liberate U.S. companies [so that they can] do what they have always done so well—create wealth that benefits every American." Also in the Harvard Business Review, Havas Media Labs' Umair Haque discusses whether it is possible to be "too rich":

When societies allow the rich to grow into the super-rich, they are making a series of mistakes. The mistake is not just that a class of super-rich are fundamentally undemocratic because they hold the polity ransom. The mistake is not just that a class of super-rich is fundamentally uneconomic because the super-rich hoard vast amounts of capital, starving the economy of investment, opportunity. The mistake is not just that a class of super-rich is fundamentally inequitable because it is essentially impossible that any human being has single-handedly truly created enough value to be worth tens of billions... All those are small mistakes. Here is the big one. When societies allow the rich to grow into the super-rich, they are limiting what those societies can achieve. Imagine a bountiful forest. And then — no one can say quite why — a small handful of the trees suddenly grow tall. Much taller. They became so tall and strong and broad that they block the sunlight from all the other trees. The other trees begin to wilt, and wither, and disappear. Their roots crack, and split, and turn to dust. And one day, not long after, even the roots of the tallest trees can find no water, can grip no soil. They begin to fall. Soon the whole forest becomes a desert.

[W]e need a movement for shared prosperity—a movement on a scale similar to the Progressive movement at the turn of the last century, which fueled the first progressive income tax and antitrust laws; the suffrage movement, which won women the vote; the labor movement, which helped animate the New Deal and fueled the great prosperity of the first three decades after World War II; the civil rights movement... Time and again, when the situation demands it, America has saved capitalism from its own excesses. We put ideology aside and do what’s necessary. No other nation is as fundamentally pragmatic. We will reverse the trend toward widening inequality eventually. We have no choice. But we must organize and mobilize in order that it be done.

You also may want to check out this video from Matthew Taylor of Britain's Royal Society for the encouragement of Arts, Manufactures and Commerce on enlightenment and how to live more sustainably the 21st Century:

Shopping is woven into our everyday lives, so why not automate the process in a way that benefits consumers, corporations, and the world’s poorest and most ill? This blunt pragmatism is hard to resist. In September 2011, a group of young idealists (and, counting myself, at least one journalist) gathered to strategize about how to create a better world and to examine the influence of corporations and the market on our society—but it wasn’t Occupy Wall Street. At the Next Gen: Charity conference, ten minutes away from Zucotti Park, keynote speaker and clothing mogul Mark Ecko proudly declared that “the future of non-profit is for-profit."... Consumptive outlets for our philanthropic impulses are more pervasive than ever. Yet, when charitable giving gets folded into market activity, the very space that philanthropy is supposed to provide as an alternative way of dealing with money shrinks. Traditional motivations for philanthropy, such as concern for mankind, creation of social capital, and responsibility to give back are subsumed into consumerism.

Far from novel, the very rich have had an entrée into the White House for over a hundred years. And so, while Americans might find such private-public collaborations troubling, they should not be shocked by their existence. However, they should take note that sometime between the first and second gilded ages, there has been a shift in who is doing the praising and pursuing in this partnership. While the early 20th century White House was a powerbroker being courted by an admiring philanthropist eager to fund a project in the nation’s service, the White House today is doing the admiring and the chasing of private philanthropy. Far from inconsequential, this shift is noteworthy. It seems to reflect a deeper change in how philanthropists and the federal government perceive the money that they are respectively donating and accepting.

Idea Factory's Greatest Hits

Need more reading between BBQs? We have launched a new content type focused on opportunities to think about ways to impact society through investments, including our own. Check out the first two:

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Author

Toni Johnson, Vice President, Knowledge & Influence

Toni Johnson joined Heron in January of 2013 and is tasked with designing and implementing the foundation’s long-term public influence and engagement strategy. She is a former deputy editor and staff writer for the Emmy-winning website of the Council on ...